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Chapter 2 Commercial Contracts oLaw of contract (revision + additional points) oDrafting / reading of contracts (sample contract) oInternational commercial contracts 2 Drafting / Reading of Contracts (Sample Contract) Drafting of Contracts (1) General rule: most contracts are valid in any form (no written contract required) Advice for (commercial) contracts: Draft a written contract as complete and precise as possible! Reasons: nproof of terms navoidance of legal disputes (risk to lose, expensive, time consuming, detrimental to reputation) 4 Drafting of Contracts (2) Essential points: ouse of term contract“ ocorrect name of parties odefinition of all important terms odetermination of rights and duties ouse of plain language odate + signature of all parties Typical sources of mistakes in international contracts: odifferent date formates (e.g. 03/04/2008 = 3 April or 4 March 2008) odifferent currencies (e.g. exchange rates, $ = USD or AUD) odifferent units of measurement (e.g. ton = metric ton (1000 kg) or short ton (907 kg) or long ton (1016 kg) oimprecise translation 5 Drafting of Contracts (3) Typical structure of an international commercial contract (see sample contract): oheading (type of contract) oname + address of parties actual clauses odescription of goods to be delivered or services to be provided (incl. quality, quantity, time etc.) ofixation of price and details of payment oother duties and rights of the parties (e.g. warranty, payment of tax/duty) olimitation of liability oremedies in case of breach of duties 6 Drafting of Contracts (4) Typical structure of an international commercial contract: oconfidentiality clause oduration / termination of contract oforce majeure clause (excuse of non-fulfilment in case of natural disasters, war etc.) oclause on governing law + arbitration omiscellaneous odate + signature of parties osupplements containing definitions, timetables etc. 7 International Commercial Contracts Contract Law and Global Business (1) Problem: oContract law (like most other fields of private law) is mainly national law oThis does not satisfy the needs of global business: ncontracts can touch different national laws ndetermination of applicable law and enforcement of rights difficult nhaving expertise in law of numerous jurisdictions is expensive nsame legal term can have different meanings in different jurisdictions nlanguage / translation issues 9 Contract Law and Global Business (2) Possible solutions: oapplication of one national private law to be determined by conflict of laws principles (see 1st IL II session) oharmonisation or unification of national laws (e.g. EU, WTO TRIPs agreement) ocreation of universal laws / sets of rules applicable regardless of national borders (todays topic) oarbitration (see session on international arbitration) 10 Universal Rules on Contracts There are numerous sets of universal rules on contracts, covering different aspects of international commerce and created by different institutions. Important sets of rules: (for international commercial transactions) oUN Convention on Contracts for the International Sale of Goods 1980 (CISG) oUnidroit Principles of International Commercial Contracts 2004 oICC Incoterms 2000 Application (depends on the set of rules in question): oeither automatically or oonly if parties to a contract agree application (difference to national law) onot all sets of rules available in all states 11 UN Convention on Contracts for the International Sale of Goods 1980 (CISG) (1) Link: /pdf/english/texts/sales/cisg/CISG.pdf Background: oset of rules covering certain aspects of international sale of goods odrafted by UNCITRAL (United Nations Commission on International Trade Law) oadopted in 1980, came into force in 1988 ooriginally signed by 11 states (Argentina, China, Egypt, France, Hungary, Italy, Lesotho, Syria, United States, Yugoslavia and Zambia) onow 70 parties (incl. most European states) 12 UN Convention on Contracts for the International Sale of Goods 1980 (CISG) (2) Application (see Article 1-6 CISG): oautomatic application to contracts of sale of goods between commercial parties whose places of business are in different states and neither both of those states are contracting states nor the rules of private international law lead to the application of the law of a contracting state oparties can exclude application of the CISG or derogate from or vary the effect of any of its provisions (freedom of contract) Contents: oformation of contracts (e.g. offer, acceptance, counter-offer) oobligations of buyer and seller (e.g. delivery, quality of goods, payment) oremedies for breach of contract (e.g. performance, discharge of contract, price reduction, delivery of substitute goods, damages) (similar to sales contract provisions in a civil code) 13 Unidroit Principles of International Commercial Contracts 2004 (1) Link: /english/principles/contracts/principles20 04/blackletter2004.pdf Background: oset of general rules for international commercial contracts ocreated by Unidroit (International Institute for the Unification of Private Law), nindependent intergovernmental organisation based in Rome nset up in 1926 and re-established in 1940 on the basis of a multilateral agreement (currently 60 member states) npurpose of studying needs and methods for modernising, harmonising and co-ordinating private (i.p. commercial law) between states and groups of states o1st edition adopted in 1994, 2nd edition 2004 (currently work on 3rd edition) overy successful in practice 14 Unidroit Principles of International Commercial Contracts 2004 (2) Application (see Preamble): oapplicable to all types of international commercial contracts (not only sale of goods) worldwide ono automatic application oshall be applied if agreed so by parties omay be applied nif agreement of parties that contract be governed by general principles of law or nif parties have not chosen any law to govern their contract omay also be used nto interpret or supplement international uniform law instruments nto interpret or supplement domestic law nas a model for national and international legislators 15 Unidroit Principles of International Commercial Contracts 2004 (3) Contents, i.p.: ogeneral principles (e.g. freedom of contract, good faith) oformation of a contract oagency ovalidity of a contract ointerpretation of contracts ocontent of contracts othird party rights operformance of a contract, hardship onon-performance of a contract, right to performance otermination of contracts odamages oset-off oassignment of rights otransfer of obligations oassignment of contracts olimitation periods (similar to contract provisions in a civil code) 16 ICC Incoterms 2000 (1) Link: /pdf/english/texts_endorsed/INCOTERMS 2000_e.pdf Background: o“Incoterms” = short for “International Commercial Terms“ o= set of standard trade definitions most commonly used in international sales contracts odevised and published by the International Chamber of Commerce (ICC) nglobal business organisation nthousands of member companies and associations in around 130 countries (members not states) nfounded in 1919 o1st version introduced in 1936 overy important in commercial practice 17 ICC Incoterms 2000 (2) Application: oWorldwide oonly if express contractual agreement oonly to contracts on the delivery of movable goods osome apply to certain m

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